Designing International Environmental Agreements

The international character of today's most pressing environmental problems has become a key challenge for environmental policy-making. This study combines two core dimensions of international environmental policy: the traditional search for cost-effective policy instruments and the creation of incentives for voluntary co-operation among sovereign nations. The analysis offers some policy recommendations for the design of environmental treaties and for the further development of existing international institutions to protect the global environment.

Contents:

International environmental problems: natural scientific framework; the history of global environmental policy; theoretical framework. Cost-effectiveness: the concept of cost-effectiveness; cost-effectiveness when countries differ in size; empirical relevance in case of carbon emissions; cost-effective policy instruments. Incentive compatibility: the choice of the internalization instrument; internal stabilization; external stabilization; unilateral measures; flexibility and framework provisions; conclusions. Enforcement and side payments: the model; an enforceable agreement with side payments; the case of three countries; conclusions. Financing incremental abatement costs under asymmetric information: agreements under perfect information; signalling incentives; transfers in the separating equilibrium; transfers in the pooling equilibrium; conclusions. Institutions for the global environment: the global environment facility; the Montreal Protocol Unilateral Fund; joint implementation. Summary and outlook: the scope and results of the study; future directions in international environmental policy.